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The Spatial Spillover Effects of Fiscal Expenditure and Taxation on the Number of Enterprises

Author

Listed:
  • Hao-Chen Huang
  • Chia-Wei Wang
  • Ting-Hsiu Liao
  • Chih-Wei Li

Abstract

This study aims to investigate the impact of fiscal expenditures and tax policies at the county and city level in Taiwan on the number of local business registrations, with particular emphasis on identifying potential spatial spillover effects. To this end, the study compiles panel data covering 22 counties and cities in Taiwan from 2000 to 2023. In terms of spatial dependence, Moran’s I index is employed to test the spatial autocorrelation of business activities, and the spatial weight matrix is constructed based on the queen contiguity criterion. Based on the results of the Hausman test and model fit comparison, the Spatial Durbin Model (SDM) with random effects is ultimately selected as the most appropriate model. Empirical findings reveal significant spatial autocorrelation in the distribution of business registrations. Both fiscal expenditure and tax variables exhibit not only direct impacts on local jurisdictions but also significant spatial spillover effects. In particular, expenditures on education, science, and culture show a notable positive influence on business formation in neighboring regions. Conversely, certain tax variables exhibit negative spillovers, suggesting that interjurisdictional policy competition may be present. JEL classification numbers: C71, H72, R12, C33.

Suggested Citation

  • Hao-Chen Huang & Chia-Wei Wang & Ting-Hsiu Liao & Chih-Wei Li, 2025. "The Spatial Spillover Effects of Fiscal Expenditure and Taxation on the Number of Enterprises," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 15(5), pages 1-2.
    • Handle: RePEc:spt:apfiba:v:15:y:2025:i:5:f:15_5_2
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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